By Sonal Varma & Aurodeep Nandi
Despite the fast deterioration of the second wave scenario and the imposition of evening curfews, weekend lockdowns and other partial restrictions across more than 17 states, the needle has not moved on the extent of lockdown stringency in India. The Oxford Stringency Index for India remains continuous at 69.9 as of April 18, comparable to last week.
The more extensive Oxford containment and well being index—which captures lockdown measures as nicely as testing, vaccination and other healthcare responses—also remains continuous from last week’s levels. Overall, barring a couple of states (Maharashtra and now Delhi), restrictions nevertheless do not seem as stringent.
Nomura India Business Resumption Index (NIBRI) is down: Our weekly tracker of the pace of financial activity normalisation has dipped to 83.8 for the week ending 18 April vs 88.4 in the earlier week (revised down from 90.4). This suggests that the economy is ~16.2pp under its pre pandemic typical – and at levels last noticed in finish-October.
Mobility requires a beating: A important purpose behind the fall in NIBRI is a deterioration in mobility indicators in response to the restrictions and cautious customer behaviour. Google retail & recreation and workplace mobility indicators have fallen by 1.3pp and 3.6pp from the earlier week, respectively, although the Apple driving index has dropped by a important ~19pp, specifically in the cities of Maharashtra (Mumbai and Pune). The Traffic Congestion Index (TCI) has also fallen additional to 7.5 as of April 18 vs ~10 as of April 13, and down from 16 a month earlier, though above the levels (of ~2) a year earlier.
Mixed signals on non-mobility indicators: As of April 18, everyday railway passenger revenues dropped by an typical of 25% from a month ago, as men and women reduce back on their travel plans, though this is greater than last April, when revenues dipped to zero. Railway freight revenues, which had held up fairly nicely till finish-March, have corrected by an typical of 7.4% m-o-m in April, though it has enhanced from last week. GST E-Way Bill collections declined by ~38% for the very first two weeks of April as compared with the corresponding period in February-March (on typical), reflecting significantly less movement of goods each intra-state and inter-state.
Although energy demand has weakened by -3% w-o-w for the week ending April 18 vs 3% development in the earlier week, it remains ~12% larger than its 2-year ago level. Average peak energy demand across most states continued to show an uptick in April vs March. Finally, the labour participation price remains unaffected—inching up to 40.2% for the week ending April 18 from 40.1% in the earlier week, although the unemployment price fell marginally.
More discomfort ahead of achieve: The increasing death price and anecdotal proof of hospital infrastructure obtaining severely burdened, suggests that the present status quo on lockdown stringency, may well be compromised in coming weeks. For instance, the state of Delhi and some cities in Uttar Pradesh have followed Maharashtra in imposing a full lockdown (albeit for a week). Most of the other key states have stuck to evening curfews or weekend lockdowns, but may well be compelled to impose stricter restrictions, if their hospital capacity runs out.
This suggests that the financial influence of the second wave may well extremely nicely intensify in coming weeks Consequently, regardless of the sharp drop in our company resumption index (NIBRI), it likely has but to bottom. The important threat is that the drag in mobility widens to influence the broader economy, though we nevertheless think the influence will be quick-term (1-3 months) and significantly less extreme (than in Q2 2020), due to a more pandemic-adept economy.
Overall, we anticipate a loss of sequential momentum in Q2 2021, but after the second wave passes (we assume July-September), it ought to outcome in a release of pent-up demand in the subsequent quarters. In addition, the economy ought to advantage from more rapidly vaccinations just after June, the lagged influence of simple economic circumstances, front-loaded fiscal activism and sturdy worldwide development. We anticipate GDP development at 11.5% y-o-y in 2021, up from 6.9% in 2020, with downside threat.
Excerpted from Asia Insights, Global Markets Research, Nomura, dated April 19.
Varma is chief economist, India and Asia ex-Japan, and Nandi is India economist, Nomura. Views are individual